Legislature(2009 - 2010)
04/17/2010 05:22 PM House FIN
| Audio | Topic |
|---|---|
| Start | |
| SB230 | |
| SB238 | |
| SB236 | |
| SB24 | |
| SB25 | |
| SB284 | |
| SB237 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 230(FIN)
"An Act making and amending appropriations, including
capital appropriations, supplemental appropriations,
and other appropriations; making appropriations to
capitalize funds; and providing for an effective
date."
5:26:12 PM
Vice-Chair Thomas MOVED to ADOPT HCSSB 230(FIN) (26-
GS2824\M, Kane, 4/17/10) as a working document before the
committee. There being no OBJECTION, the committee
substitute was ADOPTED.
JAMES ARMSTRONG, STAFF, CO-CHAIR BILL STOLTZE, provided a
sectional overview of the CS:
· Sections 1 through 3: governor's supplemental/capital
put into the current version at $122,224,900
· Sections 4 through 6 (page 8 through 16): governor's
deferred maintenance at $118,420,000
· Sections 7 through 9 (pages 17 to 60): governor's
portion of the regular capital budget totaling
$1,685,162,600
· Sections 10 through 12: grants to municipalities and
unincorporated communities totaling $466,293,300
· Sections 13 to 15 (pages 114 to 147): grants to the
named recipients totaling $138,982,900
· Sections 16 through 18 (pages 148 to 152): cruise ship
revenue-funded projects at $49,525,000
· Sections 19 through 21 (HB 424, currently in the
Senate): education general obligation bonds
appropriations totaling $397,200,000
· Sections 22 through 62 (pages 157 to 175): the
language portion of the bill
Mr. Armstrong noted that $10,766,400 worth of operating
budget items were distributed throughout the bill.
Mr. Armstrong listed total spending by category:
· General funds: $1,406,939,400
· Other state funds: $554,595,200
· Federal funding: $1,027,040,400
· Total funds: $2,998,575,000
Mr. Armstrong reminded the committee that number changes
had been discussed the night before and that there were two
additional changes. One was an intent language change by
Mr. Carpenter on a project in Sitka, to which the other
body agreed. Another $250,000 appropriation for a Kachemak
Bay project was grouped with other university projects.
5:31:21 PM
Mr. Armstrong detailed changes to the language section in
the committee substitute:
· Page 159, lines 12-17: Lease sales in the past couple
of days generated NPR-A revenues; an amendment adds
technically correct language.
· Page 161, lines 28-31: As per the Senate and the
Department of Revenue (DOR), $4,766,400 was stripped
out of HB 424 (Education G.O. Bond Bill); funding
related to the bonds was put into the CS.
Representative Doogan verified that the item would become a
general fund appropriation. Mr. Armstrong responded that he
was correct, contingent upon passage in November.
Mr. Armstrong continued:
· Page 162, lines 2-14: Intent language related to the
Department of Transportation and Public Facilities
(DOT/PF) ferry purchase. He noted that the Senate had
worked with DOT/PF regarding the item; the language is
compromise language.
Co-Chair Stoltze elaborated that the language was intended
to increase the likelihood that the ferry would be
constructed in the state of Alaska.
5:34:31 PM
Mr. Armstrong continued:
· Section 37, lines 24-29 (Page 163): New section
dealing with in-state gasline provisions; the inserted
language was developed with the Finance Committee's
co-chairs and the Speaker's office.
Co-Chair Stoltze acknowledged Co-Chair Hawker's work on the
item.
Representative Gara asked whether the section was for $8.2
million for the in-state gasline project. He referred to
other legislation (by Representative Chenault) with a $10
million fiscal note and wondered if that was in addition to
the amount in the capital budget.
Co-Chair Hawker clarified that the two appropriations (the
entire Section 37) on page 174 were contingent on the
failure of the legislation.
Mr. Armstrong continued with language changes, noting that
the next sections were standard district re-appropriations:
· Page 173, lines 21 to page 174, through line 19: Re-
appropriation of the legislature's lapsing funds.
· Lines 21-26, Section 55(a): $2.2 million for various
renovations and repairs to legislative buildings and
facilities.
· Section 55(b): Re-appropriation to the Legislative
Council to conduct an independent, third-party,
scientific, and multi-disciplinary study of the
potential for a large line development in Bristol Bay
drainage, not to exceed $750,000.
· Section 55(c): Request from the Municipality of
Anchorage to the Legislative Budget and Audit
Committee for an electrical power procurement
practices study and design, not to exceed $800,000. He
noted the item was a late request and that the
Anchorage Metropolitan Area Transportation Study
(AMATS) increment in the numbers section of the
capital budget had been reduced by the same amount.
· Section 55(d): Puts the remaining balance of whatever
is left over in the legislative accounts into the
budget reserve fund.
· Section 55(e): $750,000 to the Department of Commerce,
Community, and Economic Development to deal with
Endangered Species Act (ESA) issues.
· Page 160, lines 18-30: A general fund appropriation to
the bond bank to issue a 1 percent, 15-year note to
the City of Galena to help cover financial needs. He
noted that Devon Mitchell (Alaska Municipal Bond Bank
Authority, DOR) had written a letter of support for
the item.
5:39:49 PM
Vice-Chair Thomas queried contingency language on line 174.
Mr. Armstrong responded that the language applied to
various bills in the event that they passed the
legislature. For example, contingency language on page 175
related to the bond bank stipulates that the appropriation
made in Section 30(a) is contingent upon an agreement being
reached between the Alaska Municipal Bond Bank Authority
and the City of Galena that the loan is secured by the city
and is subject to state aid intercept provisions (AS
44.85.170).
Co-Chair Stoltze referred to passenger vessel provisions.
Co-Chair Stoltze introduced amendments to the bill. He
informed the committee that he would not offer Amendment 1
at that time but still had it ready in the event that there
was positive progress on the Alaska Crime Lab legislation.
The amendment would provide the appropriate language in the
capital budget related to the item.
Co-Chair Stoltze noted that he would not offer Amendment 2,
but that it would also be held.
Co-Chair Stoltze MOVED to ADOPT Amendment 3 (26-
LS8005\A.69, Kane, 4/17/10):
*Sec. A. FUND TRANSFER. The proceeds from the sale
of loans by the Alaska Energy Authority to the Alaska
Industrial Development Authority under a memorandum of
understanding dated February 17, 2010, estimated to be
$20,600,000, are appropriated to the power project fund
(AS 42.45.010).
*Sec. B. CONTINGENCY. The appropriation made in
sec. A of this Act is contingent on passage by the
Twenty-Sixth Alaska State Legislature and enactment
into law of a version of SB 301.
*Sec. C. LAPSE. The appropriation made in sec. A
of this Act is for the capitalization of a fund and
does not lapse.
Co-Chair Hawker OBJECTED for discussion.
Mr. Armstrong noted that the amendment represented a late
request from the Alaska Industrial Development and Export
Authority (AIDEA). A fund transfer appropriation would be
needed for SB 301 if it passed.
5:42:59 PM
SARA FISHER-GOAD, DEPUTY DIRECTOR, OPERATIONS, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AND ALASKA
ENERGY AUTHORITY (AEA), DEPARTMENT OF COMMERCE, COMMUNITY
AND ECONOMIC DEVELOPMENT, explained that after SB 301 had
passed the House Finance Committee, Legislative Legal
Services suggested that an appropriation would be necessary
to allow proceeds to be deposited into the Power Project
Fund. She informed the committee that an amendment had been
offered in the House Rules Committee to clarify the issue.
The bill passed and was concurred in the Senate, so the
language added by Amendment 3 would be required.
Co-Chair Hawker REMOVED his OBJECTION. There being no
further objection, Amendment 3 was ADOPTED.
Co-Chair Stoltze MOVED to ADOPT Amendment 4:
On Page 131
Insert after lines 28-30:
It is the intent of the legislature that operational
information will be shared with other Railbelt
utilities in an effort to better understand the
impacts of non-firm, renewable sources of energy on
the Railbelt grid.
Co-Chair Hawker OBJECTED for discussion.
Mr. Armstrong directed attention to page 131, lines 28
through 30 in the numbers section and explained that the
amendment would insert intent language to clarify that
operational information would be shared with other Railbelt
utilities in an effort to better understand the impacts of
non-firm, renewable sources of energy on the Railbelt grid.
Representative Doogan queried the meaning of "non-firm."
Representative Kelly explained that "firm power" was the
commitment by the utility to keep the lights on 24 hours
per day, seven days per week; the specified location is
counted as part of the capacity of the utility. "Non-firm"
means the utility would give power when it was able but
would not reserve capacity specifically for the specified
location.
5:45:55 PM
Co-Chair Hawker REMOVED his OBJECTION. There being no
further objection, Amendment 4 was ADOPTED.
Representative Kelly MOVED to ADOPT Conceptual Amendment 5:
Page 166, Line 28 following "project"
Insert:
"and the Fairbanks North Star Borough Library Fiber
Optic project"
Co-Chair Stoltze OBJECTED for discussion.
Representative Kelly explained that the amendment would
allow the expansion of the use of the existing
appropriation for the Birch Hill Disaster Communications
Project (page 166, line 28) to include the Fairbanks North
Star Borough Library Fiber Optic project. He detailed that
the library is running out of bandwidth.
Co-Chair Stoltze REMOVED his OBJECTION. There being no
further objection, Conceptual Amendment 5 was ADOPTED.
Representative Kelly moved Amendment 6 (26-GS2824\T.4,
Kane, 4/17/10):
Page 158, following line 24:
Insert a new subsection to read:
"(c) The sum of $2,000,000 is appropriated from
the general fund to the Department of Commerce,
Community, and Economic Development for payment as a
grant under AS 37.05.316 to the Alaska Travel Industry
Association to finance a national television campaign
to promote Alaska and increase the number of visitors
to Alaska for the fiscal year ending June 30, 2011."
Co-Chair Stoltze OBJECTED for discussion.
Representative Kelly explained that the travel industry had
made a request to take its funding of nearly $20 million
through various mechanisms; changes made in the Senate
included about $5 million funds added. The amendment would
add another $2 million funds to help the struggling
industry. He hoped that a longer-term solution would be
found in the coming legislative session.
Co-Chair Stoltze noted that the item was a one-time
appropriation.
5:49:59 PM
Representative Doogan queried the total for appropriations
to the travel industry. Representative Kelly replied that
the total was currently $9 million through the vehicle
rental tax plus another $5 on top; the amendment would
bring the total to $16 million.
Representative Doogan stated that he did not support the
additional increment and would vote against the amendment.
He had not heard from the travel industry about the item.
He had watched the amount grow from less than $10 million
to $16 million without any information about what the money
would be used for.
Representative Gara spoke against the amendment. He pointed
out that the legislature had given the travel industry $9
million the previous year. Before the amendment, the amount
was up to $14 million, a 50 percent increase. He believed
the $9 million had been up from $5 million a few years ago.
He was concerned that state money keeps increasing while
contributions from the membership did not.
Representative Gara continued that in other states, the
industry contributed a state tax and got a tax credit
towards contributing to marketing. In Alaska, there is no
state tax on most tourism operators, except for the biggest
ones. He called the money a "state handout" and questioned
the match between industry and the state.
5:53:10 PM
Representative Fairclough noted a possible technical
problem; the amendment was made from another version of the
bill, making the numbering wrong; the amendment should say
"page 161, following line 12." Co-Chair Stoltze agreed the
technical change should be made.
Vice-Chair Thomas expressed mixed feelings about the
amendment because of the way the fishing industry had been
treated. He maintained that the fishing industry paid $9.5
million self-assessment for marketing and gets $2.5 million
from the state. He pointed out that the fishing industry
had to fight to get $1 million in additional funds into the
budget, and the amount had been cut. He expressed
disappointment. He referred to past discussions about
taxes. He stated that the fishing industry was self-
sustaining, has a fishermen's fund, and assesses 7 percent
of its gross for marketing and enhancement. He asserted
that the tourism industry should do the same.
Vice-Chair Thomas recalled that when the salmon industry
was struggling, it created the salmon task force and worked
to remedy the situation. The salmon production tax was
intended to help the industry work its way to solvency. He
commented that the Alaska tourism industry had harmed the
fishing industry with a stand on the halibut fishery the
previous year; 1,700 Southeastern fishermen went from 100
percent quota to 40 percent, a net loss of over $30 million
per year. He requested that when the tourism industry
markets itself, it should not harm another Alaskan
industry. He argued that the response would have been very
strong if they had gone after the oil industry.
Vice-Chair Thomas reported that he expected to see an
additional $3 million or $4 million contribution back to
the state.
Representative Kelly commended the Alaska Seafood Marketing
Institute (ASMI) but stressed the need for more help for
tourism. He believed the state should help.
Vice-Chair Thomas spoke further to struggles in the halibut
industry, describing his quota and income. He had gone from
$105,000 to $35,000. He stressed the enormity of the impact
on fishermen.
Representative Austerman stated that he would support the
increment, even though it went against his inclination. He
noted that he had made argument in the past regarding the
total the state put into ASMI as compared to how much it
put into the tourism industry. He wanted parity. He
acknowledged that both industries were important to
Alaska's economy. He argued that he had difficulty
increasing tourism marketing dollars without increasing
seafood marketing dollars.
Representative Austerman informed the committee that he had
spent four years working for a past governor as a fishery
policy advisor. During that time, he was handed $50 million
to bring the salmon industry out of the economic slump it
was in. As an illustration, the industry was getting $0.05
and $0.06 per pound for pink salmon, compared to $0.35 to
$0.40 per pound that it had gotten in the past. He
emphasized that the $50 million was federal dollars, and it
effectively brought the industry back, largely through
marketing. He thought spending the money could get results.
However, there would not be the same kind of money
available from the federal government to help the tourism
industry recover. He had wrestled with the issue, but
believed state dollars were necessary. He was still opposed
to moving the appropriation to the industry itself.
Representative Austerman stated that he wanted a marketing
plan for the state that promotes tourism and seafood as
well as other homegrown products and markets Alaska as a
place to come to and do business. He hoped the Finance
Committee would acknowledge the need for a marketing
program for all aspects of Alaska.
6:03:37 PM
Representative Joule told the committee that he would
support the amendment. He had grown up in Kotzebue
observing tourism. He had then resided at the University of
Alaska and worked as a tour guide to pay his way to
college. He reported that his children volunteered for
tourism work and got jobs in the industry when they could
legally work. However, there are no more tourists in the
area.
Representative Joule thought the increment would help in
places where people are struggling. He pointed out that the
industry had been asked to come up with different ways of
raising funds, and they had, but the legislature was not
ready to go the route proposed. He acknowledged the
concerns stated and believed Alaska should be a destination
market.
Representative Kelly pointed out that there was a match on
the increment of $2.7 million.
6:07:09 PM
Representative Gara asked whether the match was included in
the total.
Representative Doogan MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Joule, Kelly, Salmon, Thomas, Austerman,
Fairclough, Foster, Hawker, Stoltze
OPPOSED: Gara, Doogan
The MOTION PASSED (9-2). Amendment 6 was ADOPTED.
6:08:27 PM AT EASE
6:35:32 PM RECONVENED
Co-Chair Stoltze MOVED to ADOPT Amendment 2a (26-
LS8005\A.70, Kane, 4/17/10):
*Sec. A. DEPARTMENT OF LAW. (a) The amount
necessary for the purpose, not to exceed $12,443,959,
is appropriated from the general fund to the
Department of Law to pay the principal of the award of
damages entered against the state in Donald H.
Carlson, et al. v. State, Commercial Fisheries Entry
Commission, 3 AN-84-5790 Civil (Anchorage Superior
Court).
(b) The amount necessary for the purpose, not to
exceed $7,029, is appropriated from the general fund
to the Department of Law to pay the costs entered
against the state in Donald H. Carlson, et al. v.
State, Commercial Fisheries Entry Commission, 3 AN-84-
5790 Civil (Anchorage Superior Court).
(c) The amount necessary for the purpose, not to
exceed $7,482,569.73, is appropriated from the general
fund to the Department of Law, to pay the award of
attorney fees entered against the state in Donald H.
Carlson, et al. v. State, Commercial Fisheries Entry
Commission, 3 AN-84-5790 Civil (Anchorage Superior
Court).
(d) The amount necessary for the purpose, not to
exceed $62,356,738, is appropriated from the general
fund to the Department of Law, to pay the interest on
the principal of the award of damages entered against
the state in Donald H. Carlson, et al. v. State,
Commercial Fisheries Entry Commission, 3 AN-84-5790
Civil (Anchorage Superior Court).
(e) If the amount available for appropriation
from the general fund is insufficient to fully fund
the appropriations made in (a) - (d) of this section,
the amount necessary to fully fund any of the
appropriations made in (a) - (d) of this section is
appropriated from the budget reserve fund (AS
37.05.540) to the Department of Law for the purpose
specified.
(f) It is the intent of the legislature that the
Department of Law administer the appropriations made
in this section in a manner that minimizes their
expenditure.
*Sec. B. LAPSE. The appropriations made in sec. A
of this Act lapse June 30, 2014.
*Sec. C. Section A of this Act takes effect
immediately under AS 01.10.070(c).
Co-Chair Hawker OBJECTED for discussion.
Co-Chair Stoltze explained that the amendment was a fairly
large appropriation related to the on-going Carlson
litigation.
CRAIG TILLERY, DEPUTY ATTORNEY GENERAL, CIVIL DIVISON,
DEPARTMENT OF LAW, provided a brief overview of the Carlson
case. The lawsuit began in 1984 as a challenge to
legislation that charged commercial non-resident fisherman
three times more than residents for entry permits and crew
licenses. The case has been to the state supreme court and
is currently there for the fifth time. Four previous
decisions have found that some surcharge to non-resident
commercial fishermen is permissible, but the surcharges
have to be justified by calculating the resident's per-
capita contribution to the budget. It was also found that
the differential calculation does not have to be exact; a
50 percent margin above the actual differential is
allowable on non-resident fees. Class members are entitled
to refunds for payments in excess of the allowable
differential. Most important for the current discussion,
the interest provided under the state revenue code statutes
was applied so that on the claims arising from 1984 through
2004, interest accrues at an average of just over 11
percent compounded quarterly.
Mr. Tillery informed the committee that on March 22, 2010,
Judge Michalski entered a final judgment on the Carlson
case in the amount of $82,290,295. The amount is broken
down as follows:
Principle: $12.44 million
Prejudgment interest: $62.35 million
Attorney's fees: $7.48 million
Costs: $7,000
Mr. Tillery continued that under an administration plan
that had been adopted, when the money was appropriated it
was to be paid into a refund trust account administered by
a private company. The trust account is owned by the class
but subject to the continuing jurisdiction of the court.
Money under the original plan could not be distributed from
the trust account until there was a final judgment and the
money had been deposited in the account. The plan
originally provided that if the judgment was paid in full
in the account by May 14 [2010], interest would be staid as
of January 31, 2010. Because interest accrues at a little
over $20,000 a day, the incentive was significant.
(6:39:35)
Mr. Tillery continued that the state had recently appealed
the final judgment on two grounds. First, the notion that
the interest was correctly calculated at 11 percent
compounded quarterly was directly challenged; the state has
argued that there should be no interest and that if there
is interest it should be at the normal prejudgment rate.
Second, the state has challenged the very large attorney's
fees award primarily because the award was based on a
percentage under Rule 82; the state believes the
substantial increase in the fees is not justified.
Mr. Tillery stated that as required by AS 09.52.70, the
state has submitted an appropriation to the legislature for
the full amount of the judgment broken into the individual
components. He added that the state had requested that the
appeal be expedited. There was some objection; mediation
resulted in agreement that the refund administration plan
would be modified to provide that the interest would not
accrue on the award from January 31, 2010, if the state
paid the full amount of the amended final judgment into the
trust account by June 30, 2010. Further, the agreement
provides that the trust fund will not be distributed until
further order of the court, after all appeals have been
ended, including those to the U.S. Supreme Court. In
addition, the agreement provides that the amount of money
no longer required to be paid will be refunded to the state
together with interest earned if the judgment is modified
in any way as a result of the appeals.
Mr. Tillery concluded that an expedited briefing schedule
has been established as ordered by the state supreme court.
The agreement stops the running of interest at $20,000 per
day as of January 31, 2010, eliminates the primary downside
appealed (the continual accrual of interest), and provides
that if the state wins the appeal, the money plus interest
will be returned.
Co-Chair Stoltze clarified that the amount was not being
given away, but being put into escrow.
6:43:15 PM
Vice-Chair Thomas queried the interest rate the state would
get. Mr. Tillery responded that the state would get
whatever is earned while the money is in the trust account.
Co-Chair Hawker WITHDREW his OBJECTION. There being no
further objection, Amendment 2a was ADOPTED.
Representative Austerman MOVED to ADOPT Conceptual
Amendment 7:
Page 173, line 31
Delete:
"for a"
Co-Chair Hawker OBJECTED for discussion.
Representative Austerman explained that the amendment would
remove two words that had inadvertently been put into the
legislation on line 31, 4(a).
Representative Doogan clarified that the language would be
"the potential large mine developed."
Co-Chair Hawker REMOVED his OBJECTION. There being no other
objection, Conceptual Amendment 7 was ADOPTED.
Vice-Chair Thomas MOVED to report HCS CSSB 230(FIN) out of
Committee with individual recommendations.
HCS CSSB 230(FIN) was REPORTED out of Committee with a "do
pass" recommendation.
Co-Chair Hawker MOVED that Legislative Finance Division and
Legislative Legal Services be authorized to make any
necessary technical and conforming changes to the bill.
There being no objection, it was so ordered.
Mr. Armstrong acknowledged the work that was done on the
legislation.
Co-Chair Hawker stated that he was going to recommend "do
pass" for the bill but that he had many reservations.
6:47:51 PM AT EASE
6:54:41 PM RECONVENED
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